Are Your Wage Statements in Compliance With California Law?
I am surprised how many employers, even those that use payroll companies, have wage statements that are not in compliance with California law. I have seen more and more lawsuits based on non-compliant wage statements which can also trigger a claim under the California Private Attorney’s General Act (PAGA) for wage statement violations. (See article about PAGA penalties and wage statement violations HERE.)
– Requirements of wage statement.
Labor Code Section 226(a) requires an employer to provide a paystub, i.e., “a detachable part of the check, draft or voucher paying the employee’s wage” or separate written document if wages are paid by personal check or cash, that accurately states:
- The gross wages earned;
- The total hours worked by non-exempt employees;
- The number of piece rate units earned and any applicable piece rate if the employee is paid on a piece rate basis;
- All deductions;
- The net wages earned;
- The inclusive dates of the period for which the employee is being paid;
- The name of the employee and the last four digits of his social security number (SSN) or an employee identification number other than a social security number;
- The name and address of the legal entity that employs the worker and, if the employer is a farm labor contractor, the name and address of the legal entity that secured the services of the employer; and
- All applicable hourly rates in effect during the pay period and the corresponding number of hours the employee worked at each hourly rate (a temporary services employer must also show the rate of pay and the total hours worked for each temporary service assignment).
– Statement must show available Paid Sick Leave.
In addition, Labor Code Section 246(i) requires that an employer include on the paystub or separate written document provided to the employee each pay period, the amount of available paid sick leave (or paid time off an employer provides in lieu of sick leave).
For those employers that pay employees on a piece rate system, Labor Code Section 226.2 requires the paystub include:
- The total hours of compensable rest and recovery periods, the rate of compensation, and the gross wages paid for rest periods during the pay period; and
- Except for employers that, in addition to paying on a piece rate basis, pay at least minimum wage for all hours worked, the total hours of other non-productive time, the rate of compensation, and the gross wages paid for other non-productive time during the pay period.
– Paid vacation balance not required.
Recent cases do not require that accrued vacation be included on paystubs. When the employment relationship is terminated the amount of vacation cashed out to the employee must be included in the final paycheck. However, on an ongoing basis for current employees, the vacation accrual, unlike sick leave/PTO, does not have to be included. (Soto v. Motel 6 Operating L.P. (2016) 4 Cal. App. 5th 385 and Mora v. Webcor Construction, L.P. (2016) 4 Cal. App. 5th 385, 389)
– Penalty for failure to comply.
Under Labor Code Section 226, where an employee suffers injury due to the employer’s knowing and intentional failure to comply with Section 226(a)’s requirements, the employer is exposed to the greater of all actual damages or, $50 for the initial pay period in which a violation occurs and $100 for each violation in a subsequent pay period up to an aggregate penalty of $4,000 per employee. The employee can also recover costs and reasonable attorney’s fees. Although we have successfully argued that a one year statute of limitations applies when there are no actual damages and the penalty is imposed; the Division of Labor Standards Enforcement routinely argues for a three year statute of limitations in the case of either actual damages or statutory penalties. In other words, the exposure, if you have a number of employees, is substantial.
– No actual damages for PAGA exposure.
In addition, a recent California case held that in order to recover civil penalties under PAGA, the employee does not need to show that the violation was “knowing and intentional.” (Lopez v. Friant and Associates, LLC (2017) 15 Cal. App. 5th 773. In the Lopez case, the employee filed a complaint alleging that his employer violated Section 226(s) in failing to state the last four digits of the employee’s social security number or employee identification number on his paystubs. The Court of Appeal holding means that employer was subject to significant financial exposure for technically deficient paystubs regardless of any actual harm suffered by employees and regardless of whether the violation was knowing and intentional.
AttorneyMcCormick Barstow, LLP
7647 North Fresno Street
P.O. Box 28912
Fresno, CA 93729-8912
(559) 433-1300 main
(559) 433-2133 direct
(559) 289-3005 mobile
(559) 433-2300 faxDave.McNamara@mccormickbarstow.com